A worker labors in a salt pan beyond a pipeline in the Mahul area of Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

GAIL, GSPL Shares Jump On Pipeline Tariff Hike

Shares of GAIL (India) Ltd. and Gujarat State Petronet Ltd. jumped after the regulator Petroleum & Natural Gas Regulatory Board increased tariffs for some pipelines

The tariffs were hiked in the range of 27 percent to 691 percent for nearly six pipelines in India, according to a notification on the regulator’s website. The new prices will be applicable from April 1, 2018.

Brokerages said the hike will boost earnings per share of GAIL and Gujarat State Petronet by 6-19 percent. Shares of GAIL rose as much as 4 percent — the most in over a month — GSPL jumped up to 7.6 percent, the most in three months.

This increase in pipeline tariffs is expected to boost Gujarat State Petronet’s net profit by Rs 180-200 crore, T Natrajan, the managing director of the company, said in an interview to BloombergQuint. While it would increase the cost of gas for consumers, he expects the demand to remain unaffected.

Brokerages’ Take

CLSA on GAIL (India)

  • Big tariff hike announced of four key gas transmission pipeline networks.
  • Tariff hikes for the key HBJ and DVPL pipelines should be next.

CLSA on GSPL

  • Hike is much more than our expectations.
  • Transmission business well placed to benefit from rising Indian gas supply.

UBS

  • New tariff orders could improve earnings outlook for transmission utilities
  • The revisions to remove a long-standing overhang
  • Estimate potential EPS increase of Rs 3 and Rs 1.3 for GSPL and GAIL, respectively.

Citi

  • Quantum of revisions ahead of our expectations and should be meaningful catalysts.
  • GSPL looks best placed to benefit from latest developments.
  • Enthused by PNGRB's fast track approach in resolving pending issues.